China’s Boom: Fueled By Spies?

In 2005 when he was leader of the Opposition, Stephen Harper quoted CSIS sources as saying Chinese industrial espionage was costing Canada $1 billion a month.

He blamed Paul Martin’s government for ignoring the problem.

Last year, around the time of the G8 and G20 meetings, CSIS Director Richard Fadden walked into hot water when he said the Chinese wielded undue influence with some Canadian politicians.

He quickly back-tracked, but damage was done. A spokesman for Stephen Harper, now PM, said he had “no knowledge” of possible Chinese spying or espionage.

That’s the way it is in politics. The higher the position, the worse the memory. So Chinese defectors claiming 1,000 “spies” (to use the word loosely) operate in both Canada and Australia are met with a shrug.

Still, the record shows there is considerable Chinese intimidation directed at Falun Gong supporters around the world – not because Falun Gong is a subversive organization, but because its popularity is a rebuke to the Chinese Communist Party.

Does China indulge in industrial espionage? Huh. Might as well ask if the Pope is Catholic.

Shades of James Bond, the British Telegraph recently delved into the French experience with Chinese espionage, including the use of “honey traps” (sexy women) to lure industrial secrets from select businessmen.

One case involved a French pharmaceutical company leaving a sample of a patented liquid unattended and a member of a Chinese delegation dipped his tie in the liquid, for analyzing and copying later.

Apparently there are some 30,000 Chinese students “interning” with French companies, and this poses a possible industrial espionage threat.

The Telegraph says a frequent ploy is the “lamprey technique” – Western companies encouraged to compete for contracts with the Chinese, and increasingly to reveal more of their technical expertise until the Chinese have learned enough and then inform the bidders that the project has been shelved. They then proceed to develop their own products.

When China sought a high-speed train system, France apparently offered a six-month training course for Chinese engineers – after which no contract was signed but China brought out its own high-speed train that was remarkably similar to France’s.

Another technique is the “mushroom factory” in which French companies enter into a joint venture with the Chinese – only to discover the shared French technology is used to create a rival Chinese company producing an identical product – run by the Chinese who headed the joint venture.

A French dairy drink company, Danone, was a victim when it teamed up with the Chinese company, Wahaha, which then produced an identical drink.

More sinister, is the case of a French company (Schneider Electric) collaborating with a Chinese company and finding an attachment it had patented in 1996 was being built by the Chinese company – which took Schneider to court, claiming it stole the idea. The Chinese court fined Schneider 330 million yuan.

Added to woes, is an espionage scandal of three top executives of France’s Renault car company allegedly being paid by the Chinese for car secrets.

And so it goes. The above is the tip of an iceberg that applies to all industrial countries, and is perhaps a reason why China has become so potentially powerful economically.

It’s also a country where the buyer (and seller) should beware. Conventional rules of business and ethical behavior have different meanings to the Beijing regime.

What another terrible article.
First off: Still, the record shows there is considerable Chinese intimidation directed at Falun Gong supporters around the world – not because Falun Gong is a subversive organization, but because its popularity is a rebuke to the Chinese Communist Party.

Falun Gong is a cult, pure and simple, like the Moonies or the Scientologists. I am not justifying the Communist crack down against it (in fact I have a Chinese relative who spent time in prison because she was a member and I lived in China when the crackdown occured, I was very familiar with it because of the family connection and because it was “practiced” in Chuansha park) but Worthington should know something about the organization. It is, purely and simply, whackjob and is recognized as such by the majority of people. And it has nothing to do with espionage.

As to espionage, the Chinese have been doing it forever and Worthington is just realizing this?
Chinese culture does not recognize concepts of copyrite and intellectual property rights as we do.
It also espousing a Commie ideology should have made this obvious to even Worthington himself.

But for all the reverse engineering this is not why China has had a boom. They have started from a truly miserable base and they make things cheaper than everyone else. But his tip of his iceberg…not much underneath. KFC has had tremendous growth in China and it is not like replicating the recipe would be all that hard, people trust the quality of KFC as they trust the quality of Danone and Nestle. Brand names matter even more to the Chinese than they do to Americans since homegrown brands will invariably try a shortcut (like the melanine travesty)
GM has sold more cars in China this year than in the US even though the Chinese have reversed engineer American cars for generations (yes, GM is a joint venture, but domestic producers are 100% Chinese owned, but few people want a Chinese brand, they buy them because they are cheaper)

The worst thing about this article is how truly little Worthington knows about China, he insults himself by writing about something he knows so truly little about.

Will you please stop with the Trump shilling, the guy is a buffoon, he will never be President, he is just an entertainer. The guy made money in real estate speculation (and lost a ton as well) and marketing himself, he has nothing original or insightful to say about China. I doubt he could name the Chinese Vice President or any of the vice premiers (ie, the people who will take power starting this year)

I, personally, know far more about China than Trump ever will.

As to the trade deficit, China has a billion plus captive workforce willing to work for peanuts, they are not giving us “the Shaft” we are exploiting their workers so we can get goods made cheaply. Now unless you want to pay multiples for your consumer goods that you do now there is little we can do, and tariffs are for bread dead morons, they will just drive up inflation in America. And why the hell should I pay $20 for a kids toy if I can get it for $2? Just so some American can have a job and overcharge me? As to tariffs, I would just set up a Mexican import company and due to Nafta turn around and export it to the states and take my cut in the process.
Protectionism is for fools.

Now unless you want to pay multiples for your consumer goods that you do now there is little we can do, and tariffs are for bread dead morons, they will just drive up inflation in America.

I would argue that ballooning trade deficits ARE a form of inflation – but simply deferred inflation. We are simply borrowing now to keep goods prices lower.

I don’t have a problem with that in areas where the deferred inflation can be seen as a form of investment in the future. For example, there’s a big controversy in the solar photovoltaic market, as Chinese suppliers are heavily undercutting US manufacturers. On the other hand, even if it hurts our domestic jobs base, the cheaper photovoltaics are, the more solar generation capacity will be installed domestically – and that will yield economic benefits for a long time to come.

But as per your kids toy example … if we’re basically borrowing that $2 from China as a society (we undertax ourselves, providing consumers extra money to go buy non-essential goods from China, and then borrow the money from China to balance our books) then it’s bad for us as a society. Long term it will have negative ramifications. Frankly, from a domestic economic standpoint, it would be better for our economy if you bought one $20 Barbie manufactured in America than 20 $1 Barbies manufactured in China. From a utility standpoint, we’re subsidizing in large part waste and excess.

What the examples in Peter’s article reflect is that China runs an industrial policy aimed at protecting their long term interests. America keeps naively believing that the unfettered free market will prevail. Those examples show China has learned to take advantage of the assumptions that the free market has built into it (for example, that if someone puts out an RFP for services that requires a substantial amount of technical information to be included, that they’re serious about actually rewarding the winner with a contract).

Meanwhile, what the article doesn’t mention is the widespread belief in our IT community that China has been installing hardware “backdoors” into computer technology sent over here, that makes them vulnerable to data mining via the internet.

balconesfault: Frankly, from a domestic economic standpoint, it would be better for our economy if you bought one $20 Barbie manufactured in America than 20 $1 Barbies manufactured in China. From a utility standpoint, we’re subsidizing in large part waste and excess.

Yes, but if everyone operated on that basis than international trade would come to a standstill, not to mention if we only relied on domestically produced oil our own economy would grind to a halt.
And with domestic wages stagnant, who can afford these super expensive barbies?

Without the international market GM would cease to exist. If we start engaging in xenophobic trade wars our unemployment rate would sky rocket.

Now I don’t dispute that China engages in long term mercantalist trade policy, but their costs are greater than what people are willing to understand; polluted cities, denuded forests, lack of water, all to keep the Chinese workforce gainfully employed.

And people also have to see our benefits, American goods and services are held in high regard in China, the biggest accounting firms are all American (with business done in English) M&M Mars is 100% privately owned in China, all of its profits can be returned to America. There are a host of US companies that are thriving in China and as the populace has more money are more likely to buy US brands.

Look, I get intelletual property theft is a real problem, but that is true everywhere. I can get, for free, any program I want and I live in Mexico.

As to wages, I think we can do a number of things, we can mandate that the only goods that can be imported are not the product of slave labor type conditions, (this means certifying exporters) it would mean higher wages for Chinese employees, who can then turn around and afford to buy US products.

Without the international market GM would cease to exist. If we start engaging in xenophobic trade wars our unemployment rate would sky rocket.

Seriously? GM has invested billions in Chinese manufacturing in the last decade. We’re making a big deal because China committed to buying $900 million worth of US produced autos and parts from GM over two years … but when does GMs investment in Chinese production dictate that as in so many other areas, trade starts flowing the other way?

I do agree with this:

As to wages, I think we can do a number of things, we can mandate that the only goods that can be imported are not the product of slave labor type conditions, (this means certifying exporters) it would mean higher wages for Chinese employees, who can then turn around and afford to buy US products.

I would add tariffs for products based on metrics for environmental protection standards, with strict auditing provisions.

I see the thought of Trump rising makes guys like you nervous…Good, you free traitors have damn near ruined the country. Fair trade is wano but the thing the neo-liberals/free traders have been conning us with since after Reagan is no wano.

BEIJING — Hackers operating from China stole sensitive information from Western oil companies, a U.S. security firm reported Thursday, adding to complaints about pervasive Internet crime traced to the country.

Security consultants say China is a leading center for Internet crime including industrial spying aimed at major companies. Consultants say the high skill level of earlier attacks suggests China’s military, a leader in cyberwarfare research, or other government agencies might be stealing technology and trade secrets to help state companies.

We will never agree on your idea of free trade and a few big time Republicans agree with me and Trump

Free Traitor 101

We are desperate for jobs here but the neoliberal/free traders are running the show and have their claws embedded in both parties.

Neoliberalism describes a market-driven approach to economic and social policy based on neoclassical theories of economics that stresses the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the political and economic priorities of the state. AKA free traitors..

Example….
General Motors, the top U.S. automaker, is considering adding new plants in China in 2011 and after, a senior executive said on Tuesday, as it moves to meet steady demand in the world’s top auto market.

GM is also planning to export a “substantial amount” of its Chevrolet Sail small cars from China to other emerging markets in the coming years, said Terry Johnsson, vice president of the automaker’s China operations.

“We sold everything we could build in 2010 and the same holds true in 2011. We could actually sell more than we will be able to (build) if we are not capacity constrained. We are actually short of capacity,” he said.

“The total business is going to go up by the size of a single plant. It’s not just about this year. We’ll have to look about a real rapid increase in our capacity.”…………..

The corporations have 2 trillion stashed and we the people are looking for jobs, our manufacturing base is dissolving and we, as a country, are broke……………

The Mises Institute analyzed and commented on Reaganomics at the end of his presidency in 1988. Here are a few quotes from that article

“The Reagan administration has been the most protectionist since Herbert Hoover’s. The portion of imports under restriction has doubled since 1980. Quotas and so-called voluntary restraints have been imposed on a host of products, from computer chips to automobiles. Ominously, Reagan has adopted the bogus fair-trade/free-trade dichotomy, and he was eager to sign the big trade bill, which tilts the trade laws even further toward protectionism.”

Now keep in mind that that article was written in 1988, when all the information was still fresh in people’s minds and not twisted and contorted by time and agenda-driven quasi-historical misinformation…….

The following quote is from an article that appeared in the Wall Street Journal in 1982:

“In recent months the administration has accelerated its provocation of trade warfare with the European Economic Community over steel; with Japan over autos, airline service and high-technology products; and with the Third World over sugar and textiles. Mr. Reagan has even extended quotas on imported clothespins, citing the national interest. This is the consequence of the administration’s sensitivity to privileged business and union interests and its lack of appreciation of the people’s freedom to choose.”……………..

Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains.

Thomas Jefferson

As we peer into society’s future, we — you and I, and our government — must avoid the impulse to live only for today, plundering, for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.

Dwight D. Eisenhower

All of us have heard the charge that to thus criticize the power of Big Labor is to be anti-labor and anti-union. This is an argument that serves the interest of union leaders, but it does not usually fit the facts, and it certainly does not do justice to my views. I believe that unionism, kept within its proper and natural bounds, accomplishes a positive good for the country. Unions can be an instrument for achieving economic justice for the working man. Moreover, they are an alternative to, and thus discourage State Socialism. Most important of all, they are an expression of freedom. Trade unions properly conceived, is an expression of man’s inalienable right to associate with other men for the achievement of legitimate objectives.

but when does GMs investment in Chinese production dictate that as in so many other areas, trade starts flowing the other way?

We have to be producing something China wants but can not make (we do, just not enough). But you are ignoring a few key features of GM, all of their revenues helps their bottom line, which keeps US autoworkers, suppliers, engineers, management, etc. all working.

Protectionism doesn’t work, it aggravated the recovery from the Great Depression and economists everywhere agree that Smoot Hawley tariff act was an unmitigated disaster.

After WW2 the US had massive surpluses in trade, why is that perfectly fine with everyone in America but any deficit is cause for changing economic policy. Free trade for me but not for thee?
I am not saying China should not open their market more but I am not convinced US workers will benefit, US businesses, absolutely.

But you are ignoring a few key features of GM, all of their revenues helps their bottom line, which keeps US autoworkers, suppliers, engineers, management, etc. all working.

The problem is that I see much of that as a short term phenomena. At some point, China will capture the engineering and management, the same way they’ve captured much of the labor.

Protectionism isn’t a goal unto itself – but it is a useful tool. I believe that the US has over the last few decades surrendered a massive structural advantage that we possess, squandered it for ideological reasons, for the pursuit of short term profit and political capital, and because a lot of those with hands on the levers wanted to crush organized labor and offshoring jobs was a great tool to do so with. That structural advantage was access to the most desired marketplace in the world, America.

Everyone seems to act as if China will just play nice and grant us access to their markets as soon as their standards of living increase enough, etc. I think they’re deluded. China will do what we did not do – strictly manage and ration out access to their markets, demanding a pound of flesh each time access is granted.

After WW2 the US had massive surpluses in trade, why is that perfectly fine with everyone in America

After WW2 the US also spent huge amounts of money to rebuild economies around the world, and while we did so to ensure free markets that profited us, we did not stipulate that those markets profited us. I don’t think the Chinese will be so cavalier with any aid they provide.

It is a well known fact that during the 19th century book publishers in America pirated the works of Dickens, Trollope and other English authors. Some of these authors actually went to court to recover damages.

Just because I read that in a biography of Dickens, doesn’t give you the right to assume that I despise America. Perhaps if you broadened your reading habits beyond politics and foreign trade, you might improve your ability to discuss other subjects.

If repeating well established facts is a capital crime on FrumForum, I suppose I should expect a knock on my door at 3 in the morning from the Comment Gestapo.

To reply to your assumption: No, I don’t dispise America. Parents do not despise their children and children do not despise their parents. Quite often they are disappointed in them. Needless to say, since the napalming of the jungles of Viet Nam and all the inhabitants therein, I have felt from time to time some disappointment in my country.

I would love to be able to vaporize these occurrences from my memory, but I can’t. Maybe old age will.

The perfect shall always be the enemy of the good. Still, I can dimly see the lamp lifted beside the Golden Door.

All forgiven and you’re right I aint much on Dickins but I sur do like me sum Twain

As by the fires of experience, so by commission of crime you learn real morals. Commit all crimes, familiarize yourself with all sins, take them in rotation (there are only two or three thousand of them), stick to it, commit two or three every day, and by and by you will be proof against them. When you are through you will be proof against all sins and morally perfect. You will be vaccinated against every possible commission of them. This is the only way.
- Mark Twain On Being Morally Perfect

In 2007 I did a photo essay in Laos on the bomb hunting culture in the Xiang Khouang province which is littered with bombs. I really do get your point..

From 1964 to 1973, the U.S. dropped more than two million tons of ordnance over Laos during 580,000 bombing missions—equal to a planeload of bombs every 8 minutes, 24-hours a day, for 9 years. The bombing was part of the U.S. Secret War in Laos to support the Royal Lao Government against Pathet Lao and North Vietnamese Army. The bombings destroyed many villages and displaced hundreds of thousands of Lao civillians during the nine-year period.

Of the 260 million cluster bombs dropped, up to 30 percent of the cluster bombs dropped by the U.S. in Laos failed to detonate, leaving extensive contamination from unexploded ordnance (UXO) in the countryside. These “bombies,” as the Laotians now call them, have killed or maimed more than 34,000 people since the war’s end—and they continue to claim more innocent victims every day.

I hadn’t quite decided whether to literally air my dirty linen at FF but here it goes.

I started high school in ’53 and as you may know the ’50s were the zenith of American greatness. It’s ideals, its influence, its relative strength, its people. Black and white television was only a couple of years old.

While the civil rights problems had not yet been widely debated, Brown vs Board of Education was the van in 1954. The civil rights problem was only seen by Northerners who travelled to Florida in the winter. The solid South was still a Democratic asset. Joseph McCarthy was censured in 1954. The 1959 Cadillac tail fins took your breath away. Gas was 25 cents a gallon.

To be a teenage white, male, American was unquestionably the best thing in all creation. There was absolutely no debate about the qualities of America. Absolutely nothing here to be despised. Hardly anything that disappointed. But the quest for civil rights and then women’s rights produced a detestation between Americans that still exists.

But to return to my dirty linen. In the mid 50′s, I was in high school and television wasn’t 10 years old. On the week-ends I would sometimes watch a movie on t.v. Movies were usually over sometime between 12:30 and 1 am. When the movie was over the station would go off the air. But before it signed off, it would put up a black and white American flag flapping in the breeze and and play an instrumental of The Star Spangled Banner.

And if I was still in the den, I would stand up in my underwear when the National Anthem was played and wouldn’t turn off the television until it was over.

Calm down. In 2009, US exports were $1.5 trillion. Imports were $1.9 trillion. The US imported $253 billion in petroleum-related pruducts. If the US could reach energy independence, there is no serious trade deficit. China is not the problem; carbon imports are.

Annual Summary for 2010 Goods and Services
For 2010, exports of $1,831.8 billion and imports of $2,329.7 billion resulted in a goods and services deficit of $497.8 billion, $122.9 billion more than the 2009 deficit of $374.9 billion.

For goods, exports were $1,289.1 billion and imports were $1,935.6 billion, resulting in a goods deficit of $646.5 billion, $139.6 billion more than the 2009 deficit of $506.9 billion. For services, exports were $542.8 billion and imports were $394.1 billion, resulting in a services surplus of $148.7 billion, $16.7 billion more than the 2009 surplus of $132.0 billion.

balconesfault, you have a fetish with import and exports but not who is getting the profits. US brands in China are doing very well, which goes to the bottom line of companies like Yum Brands, Pepsico, GM, Intel, etc. The headquarters, the R&D, the shareholders, etc. are mostly in America. My family in China has a factory in China that sells to the domestic Chinese market. I have real estate holdings in China (how many Chinese have real estate holdings in the US?). All of this is a material benefit to me. I also live and work in Mexico and send money from Mexico every month to my American accounts. None of this would be possible with protectionism.

I am not disputing everything you say, Bush giving a few trillion to the investor class at the exact same time that profits from China were soaring was about the stupidest thing to ever do. The elites scored hugely because they benefit the most from the global economy. But it was inevitable.

The US does have access to the Chinese market. Go to China, there is virtually every product that you can find (except Pretzels, the Chinese don’t eat Pretzels. I have no idea why) in an American store. I am not just talking about in the Carrefours and Walmarts (yes, they have them both, including chains from Germany, Italy) but also in the Yi jia jia you (Lotus) where I bought my Quaker oats and snickers bars, and American fruits and vegetables and beef.

The emergence of the developing markets has been a God send, maybe not for Americans but for the people in these countries. Brazilians are living a much better life than a generation ago when there were wage and price controls and a rigid currency and closed market. Would you rather they go back to being poor just so a few factory workers can have jobs?

As to protectionism, we slapped a tariff on Brazilian ethanol that they can produce a lot cheaper than we can to keep ADM happy, and boy are they. They benefit from charging more for ethanol than they normally could, and they tighten up corn supplies so they jack up those prices as well. Win win for ADM, I don’t see much of a win for anyone else though.

balconesfault, you have a fetish with import and exports but not who is getting the profits. US brands in China are doing very well, which goes to the bottom line of companies like Yum Brands, Pepsico, GM, Intel, etc. The headquarters, the R&D, the shareholders, etc. are mostly in America.

Until, I would argue, China uses some of their massive dollar holdings and buys some of those assets you speak of.

You speak of all those American products that can now be bought in China. I’ll bet that every time access is granted it comes with a price.

It’s always possible to pick out bad protectionist measures, and I don’t advocate stupid protectionism. But while you see force feeding the hyper-wealthy their leveraged benefits from global trade while the rest of the wage pool remains stagnant as inevitable, I see room for government to fulfill one of its primary roles – working to ensure that corporate and global interests don’t degrade our standards of living – by smart and aggressive trade policy. Just unfurling the “Free Trade” banner and stepping back to see how it all plays out is a long term recipe for failure.

“Until, I would argue, China uses some of their massive dollar holdings and buys some of those assets you speak of.”

“But more than 1/3 of that are mining exports, aren’t they? And we’re ramping up timber exports to China as well…”

Are all assets for sale in America, for sale to China? To use a current example, could the Shanghai Stock Exchange be considered a serious buyer of the NYSE? Does China have to sit at the back of the bus when it comes to buying certain corporations and into certain industries, that corporations in England and Germany would have no trouble bidding for?

And if it is the case that China can only use its massive holdings for certain assets , why then should they not buy only the resources they need, even it it puts heavy demand on the existing supply and creates world wide inflation in its wake? How bad is inflation really, when it effects all currencies and you remain in the catbird seat?

Maybe the real question is who didn’t trust whom first? Doesn’t the Chinese distrust of the West stemming from the Opium Wars predate our distrust of them and their history of communist rule?